Gold down 1pc near $US1700/oz on economic fears

Gold fell 1 per cent on Tuesday, tumbling below technical support and hovering just above $US1,700 an ounce, pressured by economic worries that slammed equities and commodities and lifted the dollar.

Bullion, a traditional inflation hedge, broke below its 50-day moving average as US equities slid almost 2 per cent on poor earnings from major multinationals led by DuPont that fed fears of a global economic slowdown.

The TR/J CRB index fell more than 1 per cent. Market watchers said the economy appeared to be slowing despite the latest program by the Federal Reserve to purchase mortgage-backed debt.

“It feels like deflation is now back in, and the quantitative easing is not going to help out the economy," said Phillip Streible, senior commodities broker at futures brokerage R.J. O’Brien.

The Fed is due to issue its latest policy statement on Wednesday. Most economists expect the US central bank to refrain any additional easing ahead of the November 6 US election.

Spot gold was down 1.1 per cent at $US1708.84 an ounce by 3.18am AEDT. US COMEX gold futures for December delivery were down $US16.20 an ounce at $US1710.20, with trading volume on track to finish in line with its 30-day average, preliminary Reuters data showed.

On gold options, political uncertainty related to the US election prompted investors to reduce bullish bets and guard against further losses, said independent COMEX gold options floor trader Jonathan Jossen.

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This month, gold hit a 2012 high at $US1795.69 after the Fed unveiled a third round of bond-buyback known as quantitative easing to stimulate growth. It has not broken above $US1800. In its last policy meeting in September, the Fed explicitly tied its $US40 billion a month bond-buying to US jobs growth. While some recent data have been encouraging, the jobless rate remains elevated at a relatively high 7.8 per cent.